Illumina CEO Jay Flatley on How to Keep an Edge in the Fast-Paced World of Gene Sequencing

San Diego-based Illumina (NASDAQ: ILMN) is without a doubt one of the bigger success stories in biotech of the past decade. It makes biological research tools that significantly boost the efficiency of high-speed gene sequencing, instruments that spot subtle variations in long stretches of DNA, and products that analyze important ways in which genes can get turned on or off. The company, founded in 1998, has grown to almost 1,800 employees and a stock market valuation of more than $4.7 billion.

While getting to the mountaintop is hard in any business, it’s just as hard to stay on top. That’s particularly true in this era of mind-boggling innovation in gene sequencing, in which a number of companies are racing to bring the cost of an individual human genome sequence down to $5,000, or even $1,000 in the not-so-distant future. This is a technology race with profound implications for the healthcare system, and with the potential to usher in the long-envisioned era of personalized medicine.

That’s why I was happy to have a chance to sit down last week with Illumina CEO Jay Flatley for an interview at his company’s headquarters in San Diego. Flatley, 57, has been in charge at Illumina since its early days in October 1999. We covered a lot of ground in a little more than 20 minutes, so to make this easier to digest, I’ve broken the conversation into two parts. The first part is running today, with Part 2 coming tomorrow. Enjoy.

Xconomy: We hear so much about this being a really intense period of innovation in sequencing. It’s better, faster, cheaper. The $1,000 genome is apparently coming. Is this the most innovative period you’ve seen in sequencing?

Jay Flatley

Jay Flatley: Yes. Without a doubt. I was involved in the prior switchover from gel-based sequencing to capillary sequencing, in my prior company, and we launched a product called MegaBACE. It was the first capillary DNA sequencer. AB [Applied Biosystems] followed about a year later. Those technologies wound up sequencing the human genome. There was a lot of background research work going on in universities that was funded by the National Institutes of Health, but at that time, no products made it to market other than those two. So there was no market innovation.

I sold one company to Amersham, and Amersham didn’t invest in it. So AB had a run from 1998 until about three years ago, where they effectively had no competition in the high-end sequencing market. Innovation almost stopped. If you look at what transpired in those 10 years, it was close to zero in terms of real innovation. They made them smaller, or a little bigger. More capillaries, fewer capillaries. No dramatic changes. It was really with the advent of next-gen sequencing that made all the venture people realize there are other ways to do sequencing. Huge amounts of money poured into the space. And the elasticity of the market became apparent, because of the potential price points. People said, ‘Wow, we’re going to be sequencing millions of people here, and millions of crops, and animals. It’s going to be an enormous market. And that’s what has fueled the money coming into the space.